Input-Output Analysis of Economic and Environmental Interactions

Abstract

The two preceding chapters have emphasised, in their turn, some of the environmental consequences of the economic behaviour of individual firms and consumers, and some of the environmental consequences of economic activity in its most aggregated form. The problems of aggregation have commanded the attention of most economists at one time or another. Despite the attention that it has received, however, the links between micro and macro analyses have been forged in only the most crude forms. It is not the purpose of this chapter to explore the microeconomic foundations of macroeconomics. Instead, we shall consider the method of input-output analysis which may be regarded as a way of circumventing the problem of aggregation, in so far as it is an attempt to cope simultaneously with all microeconomic units, particularly on the production side of the economy. More than this, input-output analysis is designed for empirical work and it will be our concern to see how useful it can be for studying economic and environmental interactions.